You will see in the headlines that Bitcoin is a bubble and that you should not buy Bitcoin because it is about to burst but this could not be farther from the truth. What the mainstream media are not paying any attention to are the huge stock market and real estate bubbles. When the price of BTC drops dramatically the world economy does not come to a standing still halt as has been proven since 2008. When the stock market or real estate markets crash it causes great economic disasters that can take years or even decades with the size of the current market to fully recover from.

It is not just the stock market and real estate bubbles that once pop will bring the house of cards down with it. The most worrying sector is the derivatives market which has never been so large before. These financial instruments have brought around great depressions and used to be banned until Bill Clinton made them legal again. The bonds market is also another bubble on its way to bursting and if this happens hyperinflation will be one of the biggest problems faced by governments. History shows us that this all will come to fruition, it is just a matter of when.

The question is what will happen to Bitcoin and Cryptocurrencies once the financial collapse takes place. The signs are that when economic circumstances start to deteriorate the price of Bitcoin rises. A prime example of this is during the Cyprus and Greece bailout which saw the price of BTC rise considerably during this period. With banks stopping access to cash in ATM machines, Bitcoin was the perfect solution to be able to store it safely out of the banks and Governments’ hands.

What also happens during a depression is interest rates skyrocket and start to see hyperinflation. This will mean it is extremely hard to get finance from banks and the cost can make it unsustainable. The ICO market is a perfect solution to this problem and as the banking sector suffers, ICOs will boom. More companies will look to these as a cheap way to raise money and will create their own cryptocurrency.

If the derivatives market crashes, there is not enough money to solve it as the sector is over 10 times the size of the global banking sector. Governments will need to find new solutions for money and finance due to total failure of the banks. There are two options when this happens. The first is world war 3 and the second is adopting the Blockchain and Cryptocurrency to provide a fairer, more transparent financial system that rewards its users, and not steal from them.

Conclusion

It is certain that during our lifetimes the financial system will need to be completely revamped. When this takes place it is going to be one of the most dangerous in our history. Luckily we have a solution and it is called cryptocurrency, it just needs one nation to fully adopt it as a national currency and then the other will follow.

The post How Will Bitcoin Perform During The Next Financial Crisis appeared first on NewsBTC.

At a standing-room-only meeting of the Amelia County School Board on Monday night, residents heard that the financial crisis that prompted the cancellation of a day of classes last month had eased slightly but that the larger problems remain.

The residents urged board members to continue their work addressing the challenges.

Becky Boswell, the schools’ accounting manager, told the board that while reviewing records, she found that the school system had about $581,000 of local funding available that had previously been reported as spent.

The unearthed money means 75 percent of the $5 million the school system gets from the county has been spent for this school year. The school system’s total budget is $18.5 million.

Superintendent Jack McKinley called the discovery of the money great news that buys the school system more time to get a handle on its finances.

“The numbers are playing out in our favor,” McKinley said. “The challenge still remains.”

McKinley has said the financial problems stem from starting the school year before Aug. 15. That created an extra payroll period during the first half of the year.

Cost-saving measures have been put in place to help keep money available, including restrictions on using classroom refrigerators and other appliances and canceling a day of classes prior to winter break.

McKinley said Monday that he will be reviewing the county’s finances over the next couple of weeks. He said if the current spending freezes remained in place, about $330,000 could be saved.

County Administrator A. Taylor Harvie said last month that for fiscal year 2017, the school system had about a $482,000 deficit. He said the deficit coincided with the tenure of the school system’s former finance director, Bill Midkiff, after years of surpluses in the hundreds of thousands of dollars.

Midkiff’s name did not come up at Monday’s meeting. Instead, over the course of the school budget public hearing and a comment period, 14 people encouraged the School Board to continue working to address the financial problems and for the community to come together.

Robyn Whittington called on her neighbors to ease up on the negativity displayed on social media.

“That’s not the Amelia County I know,” Whittington said. “(Let’s) come together as a community.”

In other matters, the board elected Glen Wilkerson to replace Jim Ferrara as chairman. In remarks after he was elected, Wilkerson said steps had been defined to address the financial problems.

“We will fix it,” Wilkerson said. “We will move forward with more transparency.”

What caused Black Monday, the stock market crash of 1987?

A:

Monday October 19,1987, is known as Black Monday. On that day, stockbrokers in New York, London, Hong Kong, Berlin, Tokyo and just about any other city with an stared at the figures running across their displays with a growing sense of dread. A financial strut had buckled and the strain brought world markets tumbling down.

In the United States, sell orders piled upon sell orders as the Dow shed value of nearly 22%. There had been talk of the U.S. entering a bear cycle – the bulls had been running since 1982 – but the markets gave very little warning to the then-new Federal Reserve Chairman Alan Greenspan. Greenspan hurried to slash interest rates and called upon banks to flood the system with . He had expected a drop in the value of the dollar due to an international tiff with the other G7 nations over the dollar’s value, but the seemingly worldwide financial meltdown came as an unpleasant surprise that Monday.

Exchanges also were busy trying to lock out program trading orders. The idea of using computer systems to engage in large-scale trading strategies was still relatively new to Wall Street and the consequences of a system capable of placing thousands of orders during a crash never had been tested. These computer programs automatically began to stocks as certain loss targets were hit, pushing prices lower. To the dismay of the exchanges, program trading led to a domino effect as the falling markets triggered more orders. The frantic selling activated yet another round of stop-loss orders, which dragged markets into a downward spiral. Since the same programs also automatically turned off all buying, bids vanished all around the stock market at basically the same time.

Ominious Signs

There were some warning signs of excesses that were similar to excesses at previous inflection points. Economic growth had slowed while inflation was rearing its head. The strong dollar was putting pressure on U.S. exports. The stock market and economy were diverging for the first time in the bull market, and as a result, valuations climbed to excessive levels, with the overall market’s price to earnings ratio climbing above 20. Future estimates for were trending lower, but stocks were unaffected.

Market participants were aware of these issues, but another innovation led many to shrug off the warning signs. Portfolio insurance gave a false sense of confidence to institutions and brokerages. The general belief on Wall Street was that it would prevent a significant loss of if the market were to crash. This ended up fueling excessive -taking, which only became apparent when stocks began to weaken in the days leading up the fateful Monday. Even portfolio managers who were skeptical of the market’s advance didn’t dare to be left out of the continuing rally.

The Bottom Line

Program traders took much of the blame for the , which halted the next day, thanks to exchange lockouts and some slick, possibly shadowy, moves by the Fed. Just as mysteriously, the market climbed back up towards the highs it had just plunged from. Many investors who had taken comfort in the ascendancy of the market and had moved towards mechanical trading were shaken up badly by the crash.

Although program trading contributed greatly to the severity of the crash (In its intention to protect every single portfolio from risk, it became the largest single source of market risk),the exact catalyst is still unknown, and possibly unknowable. With complex interactions between international currencies and markets, hiccups are likely to arise. After the crash, exchanges implemented circuit breaker rules and other precautions to slow down the impact of irregularities in hopes that markets will have more time to correct similar problems in the future.

Learn about some signs of a potential stock market crash including a high level of margin debt, lots of IPOs, M&A activity and technical factors.

BERKELEY — The Pacifica Foundation, a Berkeley-based community radio network that includes the progressive radio station KPFA, is in financial crisis because of mounting debt — and is now teetering on the edge of bankruptcy.

Pacifica, a nonprofit founded in 1946 by conscientious objectors from World War II, is the mother of America’s alternative radio, pioneering decades of left-leaning public affairs programs and community-based music.

But it is $8 million in debt — more than double its assets. And now one of its creditors — the New York City-based Empire State Realty Trust, which is owed $1.8 million in back rent on the antenna and transmitter atop the Empire State Building used by New York station WBAI — is demanding to be paid. It has filed paperwork in California that would allow it to seize Pacifica’s assets, including KPFA.

In an effort to save its flagship station KPFA and four other stations, Pacifica is seeking loans to pay off its debt. But loans create their own problems, it acknowledges.

“It is scary, especially because it is difficult to come up with $1.8 million and it is difficult to make the changes needed to be sustainable and pay the bills,” said Pacifica’s interim executive director, Bill Crosier. “But we will get through it.”

“We have programming that you can’t hear anywhere else,” he said. “We’re a watchdog to what is going on in the White House and Legislature, as well as independent music that you can’t hear elsewhere.”

Starting Tuesday, the New York creditor has the legal authority to seize bank accounts and put a lien on Pacifica’s California properties, including the national headquarters and KPFA’s adjacent property on Martin Luther King Jr. Way.

This means KPFA could lose control of its building and finances if its property is seized or subject to a lien.

On the KPFA website, general manager Quincy McCoy warned that this “would take the Bay Area’s only truly progressive radio station off the air.”

“Pacifica has gone through so many different crises and emergencies, people say ‘Oh well, they’ll muddle through it,’” said UC Santa Cruz history lecturer Matthew Lasar, author of the books “Uneasy Listening: Pacifica Radio’s Civil War” and “Radio 2.0: Uploading the First Broadcast Medium.”

“But I’m not sure that Pacifica can muddle through this one,” he said. “I think we are in a really really bad place.”

The nonprofit foundation’s board hopes to secure two loans to forestall a crisis. One $500,000 to $1 million loan has already been offered by Los Angeles supporters, Crosier said. A larger $3 million loan is also being sought to pay off the New York debt and other financial obligations.

While he could not disclose the terms of the loan, Pacifica’s financial travails makes it very difficult to secure low-cost loans, he said. And he worries about the burden of a repayment plan. “It is not a prime rate loan,” he said. “We don’t have good enough credit.”

Pacifica’s $8 million in debt approaches the equivalent of its $10.17 million in annual receipts. And its debt is more than double its entire assets of $3.97 million, according to the Guidestar database.

Crosier disagrees with the board’s strategy and is urging the board to file for voluntary bankruptcy, which would protect the foundation’s assets from creditors and give it time to restructure. The $1.8 judgment could be reduced and its rent increases capped. While this would be expensive, it would protect assets and buy time, he said.

He said he hopes to update the stations’ programming and web platforms so that Pacifica attracts younger listeners. He also hopes to find grants and other sources of revenue.

“A loan is likely to just trade one problem for more serious problems” because there is no good repayment plan, Crozier wrote in a letter to the Pacifica board of directors.

Pacifica’s financial plight infuriates its Bay Area station KPFA, which says it is well-supported by listeners. It has paid its bills and expanded its operations, it says.

Asserting that it’s a victim of another station’s mismanagement, KPFA says that the Pacifica board should have taken steps early on to avert the crisis.

“The current financial problem at Pacifica is not of our making. Things at KPFA have been going well,” KPFA said on its website. “Although KPFA is financially healthy … WBAI is raising very little money. ”

KPFA is in the strongest financial position of any Pacifica stations, Crozier agreed. But Pacifica stations have a long tradition of helping each other out, he added. For instance, when KPFA needed money several years ago, the Pacifica network supported it.

Pacifica has been incurring losses for the last several years and its business does not produce a cash surplus to service interest or debt repayment, according to a resolution that Mr. Crosier sent to the board last week.

The network’s historic roots are deep in America’s pacifist and anarchist traditions. In the ’50s, it gained a large and proud following after the federal government called readings by poets Allen Ginsberg and Lawrence Ferlinghetti “vulgar, obscene and in bad taste.”

During the McCarthy era of the 1960s, it was investigated for “subversion.” It trained volunteers to travel to the South for the civil rights movement, broadcast an interview with Marxist revolutionary Che Guevara shortly before his death, and took to the airwaves to oppose the Vietnam War and bombing of Iraq. When the Symbionese Liberation Army wanted to distribute its famed “Patty Hearst tapes,” it went to Pacifica.

Its music shows are eclectic and noncommercial, ranging from the Grateful Dead-focused “Dead to the World,” bluegrass and country with “America’s Back 40,” “Pig in a Pen” and “Panhandle Country,” and the Mississippi Delta-inspired “Blues by the Bay.”

But it has lost about half of its listeners since 2000. (KPFA has lost fewer, an estimated 20 percent.) And it struggles to compete for attention with the internet’s vast menu of progressive blogs, podcasts, Facebook and Twitter posts.

“Younger people don’t listen to radio as much,” Crosier said. “We need to provide more web streams and other formats so they listen to what they want and when they want it.”

Pacifica hasn’t funded its employee retirement plan since 2015, and now owes the plan $750,000. It is delinquent in its audits, both for financial statements and retirement plans. Because book-keeping and reporting is deficient, it hasn’t produced a balance sheet in two years, he wrote.

A few stations do not have working capital to sustain their operations or make critical payments in a timely manner. Some do not have qualified accounting staff, he wrote.

Meanwhile, its sprawling, disorganized, opinionated and ideological governing structure — “something akin to the late Ottoman Empire of public broadcasting” — led to uncontrolled spending costs, Masar said.

It’s saddled with an across-the-network board of over 120 individuals, as well as squabbling community advisory boards. Even listeners have voting rights. Meanwhile, there’s been a lot of turnover in top leadership, so it struggles to make clear and quick decisions, he said.

“It’s drowning in governance,” Masar said.

The most recent crisis is due to a recent New York State Supreme Court ruling against the nonprofit in a lawsuit brought by Empire State Building LLC over nonpayment. The court awarded $1.8 million in damages to the company.

After the terrorist attack on the World Trade Center in 2001, rents on the Empire State Building transmission antennas soared because so many of New York City’s antennas were atop the Twin Towers. WBAI pays $60,000 a month — about $700,000 a year — for a signal. That’s more than half the station’s total annual budget.

But it’s locked into its lease for another three years. “That’s unsustainable,” Crozier said.

Unable to pay even the minimum amount for the last several months, he worries that it can’t pay the $2 million that it will accrue over the next three years. Yet default in these payments will bring Pacifica to court again — in even worse shape.

“There is a long list where we urgently need financial resources,” Crosier said, “to barely keep our head above water.”

KPFA tells its story:

To hear a KPFA podcast about its plight, go to https://kpfa.org/episode/pacificas-financial-crisis-kpfa/.

The absurdity that we are witnessing in the financial markets is absolutely breathtaking. Just recently, a good friend reminded me that the Dow peaked at just above 14,000 before the last stock market crash, and stock prices were definitely over-inflated at that time. Subsequently the Dow crashed below 7,000 before rebounding, and now thanks to this week’s rally we on the threshold of Dow 24,000. When you look at a chart of the Dow Jones Industrial Average, you would be tempted to think that we must be in the greatest economic boom in American history, but the truth is that our economy has only grown by an average of just 1.33 percent over the last 10 years. Every crazy stock market bubble throughout our history has always ended badly, and this one will be no exception.

And even though the Dow showed a nice gain on Wednesday, the Nasdaq got absolutely hammered. In fact, almost every major tech stock was down big. The following comes from CNN…

Momentum darlings Nvidia (NVDA, Tech30) and PayPal (PYPL, Tech30) and red hot gaming stocks Electronic Arts (EA, Tech30) and Activision Blizzard (ATVI, Tech30) plunged too. They have been some of the market’s top stocks throughout most of 2017.

Many believe that the markets are about to turn down in a major way. What goes up must eventually come down, and at this point even Goldman Sachs is warning that a bear market is coming…

“It has seldom been the case that equities, bonds and credit have been similarly expensive at the same time, only in the Roaring ’20s and the Golden ’50s,” Goldman Sachs International strategists including Christian Mueller-Glissman wrote in a note this week. “All good things must come to an end” and “there will be a bear market, eventually” they said.

As central banks cut back their quantitative easing, pushing up the premiums investors demand to hold longer-dated bonds, returns are “likely to be lower across assets” over the medium term, the analysts said. A second, less likely, scenario would involve “fast pain.” Stock and bond valuations would both get hit, with the mix depending on whether the trigger involved a negative growth shock, or a growth shock alongside an inflation pick-up.

Nobody believes that this crazy stock market party can go on forever.

These days, the real debate seems to be between those that are convinced that the markets will crash violently and those that believe that a “soft landing” can be achieved.

I would definitely be in favor of a “soft landing”, but those that have followed my work for an extended period of time know that I do not think that this will happen. And with each passing day, more prominent voices in the financial world are coming to the same conclusion. Here is one recent example…

Vanguard’s chief economist Joe Davis said investors need to be prepared for a significant downturn in the stock market, which is now at a 70 percent chance of crashing. That chance is significantly higher than it has been over the past 60 years.

The economist added, “It’s unreasonable to expect rates of returns, which exceeded our own bullish forecast from 2010, to continue.”

A stock market crash has followed every major stock bubble in our history, and right at this moment we are in the terminal phase of one of the greatest stock market bubbles ever. There are so many indicators that are screaming that we are in danger, and one of the favorite ones that I like to point to is margin debt. The following commentary and chart were recently published by Wolf Richter…

This chart shows margin debt (red line, left scale) and the S&P 500 (blue line, right scale), both adjusted for inflation to tune out the effects of the dwindling value of the dollar over the decades (chart by Advisor Perspectives):

Stock market leverage is the big accelerator on the way up. Leverage supplies liquidity that has been freshly created by the lender. This isn’t money moving from one asset to another. This is money that is being created to be plowed into stocks. And when stocks sink, leverage becomes the big accelerator on the way down.

Markets tend to go down much faster than they go up, and I have a feeling that when this market crashes it is going to happen very, very rapidly.

The only reason stock prices ever got this high in the first place was due to unprecedented intervention by global central banks. They created trillions of dollars out of thin air and plowed those funds directly into the financial markets, and of course that was going to inflate asset prices.

Even Federal Reserve Chair Janet Yellen says that she is concerned about causing “a boom-bust condition in the economy”, and yet she insists that the Fed is going to continue to gradually raise rates anyway…

Federal Reserve Chair Janet Yellen said the central bank is concerned with growth get out of hand and thus is committed to continuing to raise rates in a gradual manner.

“We don’t want to cause a boom-bust condition in the economy,” Yellen told Congress in her semiannual testimony Wednesday.

While Yellen did not specifically commit to a December rate hike, her comments indicated that her views have not changed with her desire for the central bank to continue normalizing policy after years of historically high accommodation.

I never thought that this stock market bubble would get this large. We are way, way overdue for a financial correction, but right now we are in a party that never seems to end.

But end it will, and when that happens the pain that will be experienced on Wall Street will be unlike anything that we have ever seen before.

Michael T. Snyder is a graduate of the University of Florida law school and he worked as an attorney in the heart of Washington D.C. for a number of years.Today, Michael is best known for his work as the publisher of The Economic Collapse Blog and The American Dream.

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U.S. Car Sales Are Set for Their First Annual Decline Since Financial Crisis

The auto industry’s 2017 tally fell short of the record set in 2016

The U.S. auto industry in 2017 likely suffered its first annual sales decline since the financial crisis eight years ago, as demand finally ebbs after a remarkable multiyear growth spurt.

Most big car makers on Wednesday morning reported that sales declined in December from a year ago, concluding the challenging year with a thud. Car companies and analysts expect U.S. sales to fall further this year, below the 17 million mark, which would be the first time since 2014 sales haven’t exceeded that level.

We’ve made it through 2017. The first-season installment of presidential Tweetville is ending where it began, on the Palm Beach, Fla., golf course of Mar-a-Lago. Though we are no longer privy to all the footage behind the big white truck, we do know that, given the doubling of its membership fees, others on the course will have higher stakes in the 2018 influence game.

The billionaire who ran on an anti-establishment platform went on a swamp-filling, deregulatory and inequality-producing tear, in the process creating the wealthiest Cabinet in modern United States history and expanding his own empire along the way. His offspring, Russia-related investigations aside, didn’t do too shabbily either. White House policy adviser Ivanka Trump’s brand opened a splashy new storein the lobby of Trump Tower in Manhattan, just in time for Christmas.

If you look at the stock and asset markets, as Donald Trump tends to do (and as Barack Obama did, too), you’d think all is fine with the world. The Dow Jones Industrial Average rose about 24 percent this year. The Dow Jones U.S. Real Estate Index rose 6.20 percent. The price of one Bitcoin rose about 1,646 percent.

On the flip side of that euphoria however, is the fact that the median wage rose just 2.4 percent and has remained effectively stagnant relative to inflation. And although the unemployment rate fell to a 17-year low of 4.1 percent, the labor force participation rate dropped to 62.7 percent, its lowest level in nearly four decades—particularly difficult for new entrants to the workforce, such as students graduating under a $1.3 trillion pile of unrepayable or very challenging student loan debt. (Not to worry though: Goldman Sachs is on that, promoting a way to profit from this debt by stuffing it into other assets and selling those off to investors, a la shades of the subprime mortgage crisis.)

Those of us living in the actual world without billionaire family pedigrees possess a healthy dose of skepticism over the “Make America Great Again” sect that believes Trump has transformed America “hugely,” for record-setting markets don’t imply economic stability, nor do 40 percent corporate tax cuts translate into 40 percent wage growth. We can march forward into 2018 carrying that knowledge with us.

But first, a recap. For the U.S. financial system, 2017 was marked by five main themes: The GOP’s “You All Just Got a Lot Richer” Corporate Tax Reduction Plan; Big Banks Still Bad; The Fed’s Minor Policy Shift; Debt; and Deregulators Appointed to Positions of Regulatory Authority.

Banks Are Still Big and Bad

The Big Six banks have paid billions of dollars in settlements for a variety of frauds committed before and since the 2007-2008 financial crisis, but that didn’t keep them from tallying up new fines in 2017. The nation’s largest bank, JPMorgan Chase, agreed to pay $53 million in fines for scamming African-American and Latino mortgage borrowers with disproportionately higher rates than for white borrowers. The Consumer Financial Protection Bureau fined Citigroup $28.8 million for not disclosing foreclosure-avoiding actions. Bank of America got fined $45 million for its foul treatment of a California couple trying to save their home.

But the Big Six bank that received the most attention in 2017, as it did in 2016, was Wells Fargo. The number of people affected by its fake-account creation scandal grew from 2 million reported in 2016 to about 3.5 million. That increase resulted in Wells Fargo expanding its associated class-action settlement to $142 million.

Wells Fargo was mired in smaller scandals, too. For instance, it charged 800,000 customers for auto insurance they didn’t need, raised mortgage rates for certain customers without properly disclosing it was going to, and made a bunch of unauthorized adjustments to people’s mortgages.

No Glass-Steagall Reinstatement, More Deregulation

The idea of reinstating the Glass-Steagall Act of 1933 featured in both the Democratic and the Republican National Committees’ platforms during the campaign season. But Trump’s treasury secretary, Steven Mnuchin, made it clear multiple times there would be no such push from the administration, arguing against doing so before senators including Elizabeth Warren and Bernie Sanders.

To emphasize his disdain for regulation and oversight, Mnuchin also pushed the Financial Stability Oversight Council, over which he presides, to vote 6 to 3 to rescind American International Group’s designation as posing a potential threat to the U.S. financial system. Thus, AIG will no longer be paying penance for its role at the epicenter of the last financial crisis by filing regular risk reports anymore. Federal Reserve Chair Janet Yellen also supported the move.

Consumer Financial Protection Bureau Bashing

In a major blow to citizen security, Richard Cordray, the Obama-appointed regulator, resigned as director of the Consumer Financial Protection Bureau in November.

During his six years at the helm of the CFPB, which the Dodd-Frank Act formed in 2011, the 1,600-person regulatory entity accomplished a lot. It has provided $11.9 billion in relief to consumers for enforcement actions affecting more than 29.1 million people, handled 1.2 million consumer complaints and garnered timely responses on concerns for 97 percent of consumers.

Still, Trump appointed White House budget director Mick Mulvaney to the post that Cordray vacated. Remember: Mulvaney as a congressman wasn’t a fan of protecting consumers. “I don’t like the fact that [the] CFPB exists,” he said. “I will be perfectly honest with you.”

Over at the Office of the Comptroller of the Currency (OCC), Joseph Otting, Mnuchin’s former partner in the takeover of IndyMac and subsequent flurry of foreclosures, was confirmed to the top position. In that spot, Otting will be able to help the Trump administration dial back more post-crisis bank regulations.

The Fed and Debt Bubbles

The Federal Reserve raised rates three times this year. With trepidation that more or larger hikes would cause a market meltdown (because cheap money has lifted banks and markets over the past decade), each time the Fed acted, it did so by the smallest sliver it could—25 basis points. All told, this brings the total rate hikes of 2017 to 75 basis points. The short-term interest rate now sits in a 1.25 percent to 1.5 percent range.

As part of its rate-hike-into-strength message, the Fed forecast that the job market and economy will further improve in 2018. Trump’s appointed Fed leader, Janet Yellen’s No. 2 man, Jerome Powell, will take stewardship of the Fed in February 2018. Policywise, he will do exactly what Yellen and Ben Bernanke did before him, given that’s how all his votes went—albeit while advocating less oversight of the big banks. That’s because cheap money turbo-boosts the stock market, and quick rate hikes can harm the bond markets.

The reality is that the Fed and the administration are scared that selling too many bonds back into the capital markets will result in broader sell-offs, which could lead to another credit squeeze and possible recession, not to mention losses for the big banks exposed to those corporations.

Zombie Companies

Fueled by cheap Fed money and low rates, the amount of outstanding corporate debt has nearly doubled from pre-crisis levels of $3.4 trillion to record levels of $6.4 trillion.

By Oct. 1, U.S. investment-grade corporate debt issuance had already surpassed $1 trillion—beating 2016’s pace by three weeks. The amount of speculative-grade (or junkier) corporate debt issued during the first three quarters of 2017 was 17 percent higher than over the same period in 2016. Altogether, that means that U.S. corporate issuance is set for another record year, as well as the sixth consecutive year of increased corporate debt issuance.

As history has shown us, all bubbles pop. Until then, certain companies are the equivalent of the living dead. The Bank of International Settlements (BIS), or central bank of global central banks, defines zombie firms as “firms that could not survive without a flow of cheap financing.” The latest BIS Quarterly Reportlabeled one of every 10 corporations in emerging (EME) and advanced countries as a “zombie.”

Corporate debt of nonfinancial U.S. companies as a percentage of GDP has surged before each of the last three recessions. This year, it reached 2007 pre-crisis levels. That didn’t end well last time. Plus, now, that debt has been powered by central banks the world over.

And whereas, in the past, companies used some of their debt to invest in real growth, this time corporate investment has remained relatively low. Instead, companies have been on a spree of buying their own stock, establishing a return to 2007-level stock buybacks.

Corporations and Taxes

Companies have taken advantage of cheap money to increase their debt and buy their own stock, even though Trump and the GOP peddled the notion that decreasing their tax rate by a whopping 40 percent would move them toward diverting their money from the stock and bond markets into jobs and wages.

The GOP tax bill cuts the corporate tax rate from 35 percent to 21 percent. Collectively, large U.S. companies only pay an average effective tax rate of 18 percent anyway. They only contribute 9 percent to the overall tax receipts the U.S. government receives each year.

Companies like General Electric haven’t paid any taxes in a decade. But more to the point, that tax cut is another form of cheap money giveaway. Even Jamie Dimon, chairman and CEO of JPMorgan Chase, concurred. He called the tax cut a “QE4” (another round of quantitative easing, added to the three rounds the Fed executed over the past decade to reach $4.41 trillion in credit).

Looking Ahead to 2018

As we enter the new year, consider this: All the Fed talk about “tapering” or reducing the size of its book, and even the 75 basis points of rate hikes, are a setup for the next act of the same play.

Since the Fed’s announcement that it was going to stop reinvesting the interest payments on the bonds it’s holding, the size of its book has been about the same. There’s always a mismatch between what the Fed says and what it does.

So despite its tapering talk, the Fed’s balance sheet is down a mere $10 billion (an equivalent of a rounding error) this year. Its book of assets remains at $4.41 trillion, a figure equivalent to 23 percent of U.S. GDP. Incoming Fed Chair Powell is more likely to keep supplying cheap money than withdrawing it from the markets in the instance of any wobbles.

What does that mean? Financially speaking, 2018 will be a precarious year of more bubbles inflated by cheap money, followed by a leakage that will begin with the bond or debt markets. The GOP tax cuts won’t technically kick in monetarily for corporations until after the year is over in 2019, but the anticipation of extra funds will fuel more buybacks. This will help to provide cover for any rate hikes the Fed implements, because it provides corporations the ability to boost their own share prices further.

Meanwhile, the Treasury Department, Federal Reserve and other smaller regulatory authorities in Washington will push for greater deregulation of the financial systems and banking industry on any level possible. If there is another financial crisis in 2018 or later, it will be worse than the last one because the system remains fundamentally unreformed, banks remain too big to fail and the Fed and other central banks continue to control the flow of funds to these banks (and through to the markets) by maintaining a cheap cost of funds.

Politically, no one in any position of power will do anything to fix any of this.

Japan’s renowned architect Kengo Kuma is the latest to feature in PLANE—SITE’s video series Time-Space-Existence, exploring the inner workings of his Tokyo office and how the Japanese financial crisis of the early 1990s shaped his firm. In the video, Kuma discusses the practice’s ethos of working slowly with care to achieve happiness within architecture and stresses the importance of feeling the energy of the site and engaging with the environment to really understand the possibilities of a new project.

Kengo Kuma and Associates began in 1986, but the crash of the Japanese economy in 1991 drove the firm out of Tokyo to work with local craftsman and materials in the countryside. It was here where Kuma had the opportunity to learn about the vernacular techniques and the natural settings he so proudly integrates into his architecture today.

Things are slowly changing: from architecture as monument to architecture as environment, from the 20th century to the 21st century.

Kuma expresses his evolving philosophy, shaped by the transition of time and events, and how he has come to build buildings that are sensitive to materials and technique in an up-to-date manner entwined with modern technologies. His most notable projects have included the Stone Museum in Nasu using small repeated elements of repurposed stones to create a tactility and the Nagasaki Prefectural Art Museum that similarly uses a repeat pattern to evoke a bamboo forest.

That investor reluctance is a byproduct of the last financial crisis, the memories of which still inform cautious behavior to this day.

Despite the missed opportunities, Bernstein is still bullish on stocks heading into 2018.

The market crash of 2008 was the worst anyone could remember. Now, nearly nine years and a 300% stock market rebound later, stock investors are still grappling with the ghosts of the financial crisis, even as the bull market rages on.

The lingering memory has kept investors from capitalizing on prime market opportunities along the way, including this year, which saw the S&P 500 soar 19%, according to Richard Bernstein, the CEO and chief investment officer of Richard Bernstein Advisors.

Instead, investors have proceeded with caution, shelling out loads of money to hedge against losses, not wanting to be caught off-guard by another huge market downturn. It’s become the new normal for traders, who have embraced the undercurrent of skepticism.

“Investors still do not fully appreciate the magnitude of opportunity cost they have paid to alleviate their fears that 2008 would repeat,” Bernstein, a former Merrill Lynch chief investment strategist, wrote in a research note. “Fear has caused 2017 to largely be another year of missed opportunities.”

Bernstein doesn’t buy into this fear. He’s crunched the numbers, and says the 55% plunge seen in 2008 has an extremely low likelihood of happening again. As shown in the chart below, even a loss of 30% or more has occurred very rarely throughout history.

“Drawdowns similar to 2008’s have historically occurred only 0.5% of the time!” he wrote. “Yet, both individual and institutional investors have been structuring portfolios as though the markets were necessarily going to replay 2008.”

Richard Bernstein Advisors

Investor psychology after a market crash

Despite Bernstein’s consternation, the behavior being exhibited by the market is a natural reaction to past trauma. After a catastrophic drop, it often takes investors years to gather enough confidence to re-enter the market. Then, after they’ve missed that first stretch of gains, doubts around the rally’s longevity start to creep in, keeping them from unabashedly loading up on bullish positions.

As a result, even the smartest investors can miss out on what, in retrospect, look like easy gains. Ultimately, the whole process serves to show just how difficult it is to play a market rally with the ideal combination of timing and confidence.

For another example, look no further than the second half of the 1990s, when stocks were enjoying what still stands as the longest bull market on record. Still stung by the 1987 crash, bearish strategists called for market downturns for years, starting around 1995. That plunge didn’t end up transpiring until the dotcom bubble burst in 2000, and many of them lost their jobs along the way.

Meanwhile, the bulls that rode the wave higher into the crash were eventually discredited for failing to see it coming. Many investment professionals affected by that cycle are still in the market today, which goes a long way towards explaining the cautiously optimistic tone being derided by Bernstein.

Bernstein’s 2018 outlook

Interestingly enough, it’s that same cautious backdrop that’s informing Bernstein’s bullishness headed into 2018. When investors are wary of their surroundings, it helps keep overexuberance from creeping into the market — the same type of overconfidence that has historically blinded traders from a cracking foundation.

Those skeptics are also responsible for the types of temporary pullbacks that are healthy for the market. As soon as major indexes slip a bit, bullish investors are waiting there to scoop up more exposure at more reasonable valuations. This so-called “dip buying” has driven a great deal of equity strength during the bull market.

Bernstein’s bullish outlook for next year is also built on what it sees as continued earnings growth — a positive catalyst that’s frequently viewed as the foremost source of the almost nine-year rally. Further, he sees “significant liquidity” as another source of strength, even as the Federal Reserve engages in monetary tightening.

In the end, Bernstein’s quasi-cynical view on the 2017 market is one that distracts from the fact that stocks are still surging higher. Sure, some investors have missed out on some gains, but the downside alternative is far more stark.

And when that market reckoning does happen, we get to start this process all over again, hopefully with the added benefit of hindsight.

We’ve seen devastating hurricanes this year and miles-wide fires destroying everything in their paths and we’re likely to see worse in the coming months and years. Devastating natural disasters are happening on and around our planet.

Storms will become so deadly that even the topography of the Earth may drastically change. It’s becoming more important for you and your family to know what to do and how to prepare when weather threatens your life.

Sometimes severe weather strikes with little notice, so you need to know how to survive during and after a catastrophic weather event. Weather disasters will likely bring power outages, flooding and communication will be difficult, if not impossible.

If you’re in a flood zone, tornado or hurricane area, be sure you have the appropriate supplies to help you survive. A survival supply of water, food, medical supplies, flashlights, extra batteries, and access to important documents can set you apart from the others who find bare store shelves when they try to stock up at the last minute.

You can find detailed lists online of what you’ll need on hand to survive a severe weather event. Have a checklist when you prepare and be sure everything is readily accessible if a disaster should happen.

If you’re likely to evacuate, you should keep the survival items in a container that’s easy to carry. Water should be stored in containers that won’t decompose like glass bottles or milk cartons.

Figure that each person should have about two quarts of water every day and keep in mind that heat or lots of physical activity might increase that amount. Store some non-perishable foods that don’t require refrigeration or cooking.

We often take water for granted, but a catastrophic weather event such as a hurricane can cause storm surges. Storm surges can contaminate water, so take more water than you think you’ll need.

If a weather disaster strikes a major city, there will be millions of refugees, so you must know how to feed yourself and your family with only the food you can carry. Choose wisely to protect your chances of survival.

Other things can cause a threat to the atmosphere, besides Mother Nature. The clear and present threat of a nuclear war from rogue countries such as North Korea is yet another reason you should be prepared for survival.

If we did happen to be attacked with nuclear weapons, the aftermath will be as devastating as the actual attack. There could be nuclear or extended winters, radioactive fallout and more. The American Red Cross has preparation tips to get ready if a nuclear event should happen. The world is in chaos now, but not nearly as much as it stands to be in 2018. Be prepared.